Finance Minister Dominic LeBlanc is preparing a 2025 budget and has asked federal ministers to provide advice on how to respond to trade disruptions with a plan that will 'provide temporary support' to affected regions, sectors and workers.Blair Gable/Reuters
The federal government is facing pressure to lay out a plan to support workers and businesses should U.S. President Donald Trump go ahead with his plan to impose tariffs on Canadian goods next month.
Prime Minister Justin Trudeau is scheduled to hold an economic summit Friday with business, labour and other policy experts to discuss ways to bolster Canadian trade and growth in light of the tariff threats.
The Globe and Mail reported this week that Finance Minister Dominic LeBlanc is preparing a 2025 budget and has asked federal ministers to provide advice on how to respond to trade disruptions with a plan that will “provide temporary support” to affected regions, sectors and workers.
Policy experts say Ottawa should learn from the criticisms of pandemic-era federal programs, by ensuring supports are more targeted to workers and businesses that are in genuine need.
The U.S. granted a 30-day reprieve Monday on a plan to impose 25-per-cent tariffs on imports from Canada and 10 per cent on Canadian oil. Mr. Trump said in a statement that the pause was “to see whether or not a final Economic deal with Canada can be structured.” He also said he expected Canada to enact tougher measures to secure the border.
Finance Department deputy spokesperson Marie-France Faucher said in an e-mail that the government is actively promoting the existing employment insurance work-sharing program to employers.
“If tariffs were to be enacted, the government would support workers and businesses with a robust and measured plan that would be proportionate, adaptable, and built on lessons learned from past trade disruptions,” she said, adding that loan programs for business can also be quickly deployed if needed.
While it was much larger in scale, the pandemic provides recent experience of emergency federal programs to support workers and businesses during a major spike in unemployment. Most of the money was spent on direct support for unemployed workers through programs such as the Canada Emergency Response Benefit and for businesses via the Canada Emergency Wage Subsidy to reduce the need for layoffs.
The roughly $100.7-billion spent on CEWS and $74.8-billion on CERB and related programs made up the bulk of the more than $210-billion in pandemic-era benefit payments.
Several Auditor-General reports praised the programs for quickly softening the economic blow, but the reports also said billions of dollars may have gone to individuals and companies who should not have qualified. The Auditor-General said there should have been more scrutiny of the payments and stronger efforts to recoup funds from ineligible recipients.
Canadian Labour Congress president Bea Bruske, who is planning to attend Friday’s summit, said rather than immediately turning to new versions of CERB or CEWS, she would prefer to see enhancements to the existing employment insurance program so it is easier to access and payments are larger.
“We need to be able to make sure that workers know that we’ve got their backs and that government has their backs. And so it has to start with a robust EI package,” she said in an interview.
Ms. Bruske said the advantage of EI is that enhancements can be targeted at geographic regions that are most affected.
She said she’s been urging federal officials to lay out a plan ahead of the deadline so nervous workers can have a sense of what to expect.
The federal cabinet has authority under the Employment Insurance Act to make some changes to EI, such as waiving waiting periods, but more substantial changes could require new legislation and Parliament is currently prorogued.
Dennis Darby, president and CEO of the Canadian Manufacturers and Exporters, will also attend Friday’s meeting. He said business leaders would appreciate knowing what Ottawa has in mind so they can plan.
“During the pandemic, we were scrambling. I actually don’t believe this time we have to scramble so much,” he said.
He said his members have said they would like some sort of direct support that helps them keep employees on the payroll, which could be in the form of a wage subsidy or a temporary job-sharing program through EI.
Canadian Federation of Independent Business president Dan Kelly said if Canada matches U.S. tariffs, that will raise costs for Canadian consumers and businesses. Canadian tariffs would also bring in substantial new federal revenue, leading to a debate about how best to return that money into the Canadian economy.
Mr. Kelly said some form of direct wage or loan supports for businesses would be welcome and he’s been in discussions with federal officials about options. He said he’s concerned though that with a federal election potentially just weeks away, politicians may be tempted to spend more broadly than the situation warrants.
Stephen Tapp, chief economist of the Canadian Chamber of Commerce, said the EI program should be the “first line of defence” for a federal temporary response plan.
Mr. Tapp said projections of the potential impact of the threatened tariffs are more in line with a traditional recession. Further, specific sectors and regions will be hit harder than others, unlike the pandemic which was a much broader blow to the entire economy.
Mr. Tapp said the unpredictability of U.S. plans is also an argument for relying on the existing EI system, with some enhancements.
“I don’t think that we would necessarily need to design some different program or do some different package to help people,” he said.
University of Toronto economics professor Michael Smart recently co-authored a research paper looking at the employment effects of the government’s pandemic-era wage subsidy.
The report said the program led to a fiscal cost per job saved of more than $185,000 a year, raising questions as to whether it was the most effective public policy response available.
The report points out that unlike a similar pandemic benefit offered in the U.S. called the Paycheck Protection Program, Canada’s CEWS did not have provisions encouraging employers to restore employment to pre-pandemic levels.
In an interview, Prof. Smart said pandemic support programs amounted to a massive experiment in an emergency and officials should learn lessons from that experience.
“The basic conclusion is it did save some jobs, but not enough jobs to justify the massive expense of the program,” he said of his own research into CEWS. He said that research should influence whatever form of support Ottawa chooses to approve if tariffs go ahead.
“The money can’t go to the firms with a kind of blank cheque the same way it did under CEWS in 2020,” he said. “There will be pressure on the government from the small business community and others to have the money flow directly to the companies. I think it’s not necessary. We shouldn’t do it. But if we do it, we should tweak it and make it better.”
York University taxation professor Amin Mawani said a targeted wage subsidy could help, provided it has more restrictions than CEWS did, such as ensuring the money can’t be used by companies to fund executive compensation.
He said that in addition to enhancing EI, a wage subsidy is a good way of ensuring any government response is targeted to the specific sectors, such as manufacturing, that will be most negatively affected by tariffs.
“Not everyone needs to get these subsidies,” he said.